Understanding Local Sponsorship in the UAEIf you plan to set up a business in Dubai, one of the first things you will hear about is the requirement for a local sponsor. But what does it really mean? In simple terms, a local sponsor is a UAE national or a company that holds a 51% stake in your business, while you, as the foreign investor, hold the remaining 49%. However, it is essential to understand that the local sponsor has no role in decision-making or day-to-day operations.
Who Will Need a Local Sponsor?In Dubai, certain industries require a local sponsor, while others may not. Here is a breakdown of sectors that need a local sponsor:
- Oil exploration and production
- Water and electricity provision
- Printing and publishing
- Post and telecoms services
- Security and military services
- Road and Air transport
- Fishing and related services
- Pilgrimage and Umrah services
- Banking, financing, and insurance activities
- Commercial agency
- Blood banks, quarantines, and venom/poison banks
- Medical retail (including pharmacies)
Choosing the Right Local Sponsor in the UAE – 8 Questions to AskFinding the right local sponsor is crucial for the success of your business. Your sponsor can provide the necessary support and guidance to help you navigate the UAE’s complex legal and business environment. Because of this reason, it is best to consult a business setup consultant to find the right sponsor. That being said, here are the seven questions that you must keep in mind when assessing various sponsors in the UAE –
What level of involvement do you expect from your local sponsor?
How can you ensure the local sponsor will fulfiltheir promises?
What factors should you consider when selecting a high-profile local sponsor?
How important is the availability of your local sponsor for the success of your business?
How can you assess the compliance track record of your local sponsor’s other sponsored companies?
What are the financial terms of your local sponsor’s engagement?
What should be considered when planning an exit strategy?